Solved

GST/HST Installments and Annual Return

Forum|Forum|4 years ago
December 22, 2021
3 replies
0 views

In 2020, I made three of the quarterly payments in April, July, and October, and the fourth payment in January 2021 for the period ending December 31, 2020. I then filed the GST/HST return in February 2021. The amount filed for the period January to December 2020, based on my QB tax agency report, only included the amount for the total instalments made in April, July, and October, and the January amount was not included—therefore a final balance was owing (the fourth installment amount plus the year-end remainder), which was paid in full upon filing (QB created a bill for this final amount). After CRA’s assessment, they refunded an amount that was equal to the fourth installment via direct deposit. The deposit to the bank account had to be reflect in QB, so I used a journal entry to record the bank transaction (Debit bank account and Credit Accounts Payable). Once the journal entry was recorded and the bank transaction reconciled, the Accounts Payable now shows a new bill (in the same amount refunded) for the Receiver General. I’ve made the three installments in 2021 (I can see the total amount in the Tax Agency Report – Line 110) and the last is due in January 2022. I’m not too sure how to address the bill created for the Receiver General by the journal entry. I believe another step is missing to remove the bill. Any assistance will be greatly appreciated. Thanks.

QuickBooks Desktop

Best answer by MohnishP

I faced a similar problem, with the Q4 instalment not contributing towards line 110 of the HST Return, since the return is dated for the fiscal year end. I had to make two journal entries to fix this issue, before preparing and submitting the return. See steps below.

Fiscal year: Sep 1, 2020 to Aug 31, 2021

Instalments paid ($5400 each): Q1 - Dec 2020, Q2 - Mar, 2021, Q3 - June 2021, Q4 - Sep 2021 (i.e. month after fiscal year end)

HST Return (Wrong), before adjusting journal entries:

Line 110 shows $5400 x 3 = $16,200 instead of $21,600; hence incorrect excessive balance owing.

Made the following two journal entries (Company > Make General Journal Entries), numbered 2021HST-1 and 2021HST-2:

As you can see, we use the 'Accrued Liabilities' account to buffer the payment record back into the fiscal year end, where it belongs. Also note that the entry against the 'HST Payable' account must be recorded as 'Tax Item = HST Instalments', otherwise the HST return will show an error, and not allow filing.

The adjusted return looks as follows:

I am not an accountant, but I surmise this is something faced by every annual filer, who makes quarterly instalment payments. Why doesn't QB support (help, articles, or QB phone support) guide this process? I got deferred to my accountant, just as in this thread. Not impressed.

Hope this helps.

T

Trish_T

Hi YAD,

Thanks tor touching base with us here. QuickBooks Desktop is a wonderful product for your accounting needs. I'll be happy to point you in the right direction to get the expertise you need for the sales tax installments.

Based on the detailed information you've provided, I recommend reaching out to your accountant for the best course of action. Since installments have taken place over a period of time, you'll need to ensure that making any necessary changes won't impact other areas of your books. If you don't have an accountant we can help you locate a ProAdvisor in your local area.

Please don't hesitate to reach out with any other questions. We'd be glad to help!

Y

YADAuthor

Hi @Trish_T

Thanks for your response. It's not the solution I was hoping for, especially having provided as much detail as was necessary for understanding the situation. I'll look through the ProAdvisor listing to see what's available. Thank you.

T

Trish_T

Hi YAD,

I hear you on this. Feel free to keep us posted on how you make out.

Enjoy the rest of your day!

M

MohnishPAnswer

I faced a similar problem, with the Q4 instalment not contributing towards line 110 of the HST Return, since the return is dated for the fiscal year end. I had to make two journal entries to fix this issue, before preparing and submitting the return. See steps below.

Fiscal year: Sep 1, 2020 to Aug 31, 2021

Instalments paid ($5400 each): Q1 - Dec 2020, Q2 - Mar, 2021, Q3 - June 2021, Q4 - Sep 2021 (i.e. month after fiscal year end)

HST Return (Wrong), before adjusting journal entries:

Line 110 shows $5400 x 3 = $16,200 instead of $21,600; hence incorrect excessive balance owing.

Made the following two journal entries (Company > Make General Journal Entries), numbered 2021HST-1 and 2021HST-2:

As you can see, we use the 'Accrued Liabilities' account to buffer the payment record back into the fiscal year end, where it belongs. Also note that the entry against the 'HST Payable' account must be recorded as 'Tax Item = HST Instalments', otherwise the HST return will show an error, and not allow filing.

The adjusted return looks as follows:

I am not an accountant, but I surmise this is something faced by every annual filer, who makes quarterly instalment payments. Why doesn't QB support (help, articles, or QB phone support) guide this process? I got deferred to my accountant, just as in this thread. Not impressed.

Hope this helps.

Y

YADAuthor

Hello @MohnishP

Thank you very much for sharing this solution. It appears to be similar to what my accountant ended up doing to resolve the matter including addressing the refund. I get very uncomfortable when journal entries are required to address what seems to be simple standard bookkeeping entries. I've only learnt how to use it for recording depreciation expenses. You would think by now QB would have streamlined the process for recording these types of transactions instead of relying on journal entries.

Thanks again!

M

MohnishP

Also, regarding the journal entry to reflect the refund you have received from the CRA, I believe you may have done that backwards.

Credit the bank account (CR reduces Asset),

Debit the HST Payable account (DR reduces Liability),

and your accounting equation stays balanced.